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Monday, July 11, 2016

RUMOR THAT MAERSK COULD BY HYUNDAI MERCHANT MARINE

The big question is why would they.

Rumors grow on Hyundai Merchant Marine takeover by Maersk

Debt-ridden Hyundai Merchant Marine (HMM) seems fully geared up
for a smooth return as the company said it expects to soon join the 2M container
alliance, a key condition set by its creditors for debt rescheduling and its
rehabilitation program.

A number of overseas industry
watchers are, however, raising doubts about the real reasons behind the nation's
second-largest shipping firm's bid to join the world's largest shipping
alliance.

The U.K.-based marine transport research agency
Drewry alleged in its newsletter last month that the Korean government may have
pulled the strings in membership talks between HMM and the shipping container
operators of the 2M alliance, Maersk Line and MSC, the largest two of the
world.

"The Korean government, concerned for its ailing
shipping and shipbuilding industries, may have called upon the 2M carriers to
ride in and rescue HMM in return for favors," it said.

"Both
Maersk and MSC already have extensive liner service networks in Korea. HMM's
services would not appear to add anything to the 2M alliance, other than a bit
more scale. Why would savvy carriers such as Maersk and MSC allow themselves to
be used as a part of the conditions set by the ailing shipping company's
creditors for the restructuring program?"

Drewry
concluded that these three carriers, HMM, Maersk and MSC, are not obvious
partners in terms of culture, size or trade mix, which hints at a hidden story
behind the recent membership talks.

A number of industry
insiders at home and abroad, thus, consider it may be advanced work for a
possible acquisition of HMM by Maersk Line. Maersk Line management board member
Jakob Stausholm partially admitted the allegations in an interview with
Reuters.

"We are defending our leadership position. If we
are strong, there is no reason for us not to grow," he
said.

"If you look at the history of Maersk Line, we have
achieved our leadership position by the combination of organic growth and
acquisitions. If the right opportunity is there we will look into
it."

According to the Reuters report, Maersk has not made
any major acquisitions in over a decade but says it might be open to "the right
opportunity," although doubters believe such deals risk accumulating ships
without securing enough customers.

"The government wouldn't have struggled this much for
restructuring if we wanted to sell HMM abroad. I believe Maersk and MSC expect
HMM to play a role under the 2M alliance structure in the Asia-America
route."

Drewry, however, rebutted that HMM's shipping
capacity is not helpful enough for the 2M alliance's operation in the global
market.

"HMM is a relatively minor player in the East-West
trades with about 11 ships deployed on the Asia-Europe and Asia-North America
trade routes, able to only swell the 2M's share of nominal capacity on the two
trade routes by about 2 percent. It suggests that Maersk, the leading shipper in
the 2M alliance, rather aims to prepare acquiring it or having a joint venture
with it."

Such speculations delighted creditors of the
ailing shipping company.

"It would be a huge boost to HMM
debt repayments if Maersk intends to acquire it," a creditor party
representative told The Korea Times.

The nation's maritime
sector has been under pressure recently as shipping operators HMM and Hanjin
along with three major shipbuilders, Daewoo Shipbuilding & Marine
Engineering (DSME), Hyundai Heavy Industries (HHI) and Samsung Heavy Industries
(SHI), are undergoing restructuring due to a downturn in the shipping and
shipbuilding industries.

According to data released by the
nation's ship owners' association, if the two shipping carriers fold, the
consequences would include the loss of 5,400 jobs and damage to the country's
economy worth a total of $19.13 billion.

The government has
thus stepped in with a number of measures including a billion dollar fund to
help the two carriers' creditors ― headed by the state-run Korea Development
Bank ― withstand the losses.

The government outlined
conditions that HMM should fulfill if it wants to be included in the rescue
plan, one of which is joining a shipping alliance.

HMM was
previously talking with THE Alliance, the world's third-largest shipping
alliance, for possible membership, but things did not move forward because
Hanjin, which already has a seat at the alliance, allegedly opposed HMM joining.
A Hanjin official denied the allegations.